Brandywine Realty Trust (NYSE: BDN
) has entered into a purchase agreement with Parkway Properties, Inc. to acquire One and Two Commerce Square in Philadelphia's CBD based on a $331.8 million valuation, which equates to $175 per square foot.
Brandywine already owns 25-percent preferred interest in the assets, and will acquire the remaining common ownership interests. Closing is subject to assuming two existing first priority mortgages totaling approximately $238 million, as well as the consummation of the merger between Parkway and Thomas Properties Group, Inc.
, and other customary closing conditions. The buyer will fund the remaining purchase price with net cash proceeds of $69 million in the company's existing balance sheet.
Commerce Square consists of two 41-story, class A office towers situated on a full city block fronting Market Street between 20th and 21st Streets. The two towers, built in 1987 and 1992, total nearly 1.9 million square feet. An extensive capital redevelopment program was recently completed, and Commerce Square achieved LEED-Silver status. The properties share a central plaza, The Court at Commerce Square, which includes ground-floor retail and restaurant space above a 525-space underground garage.
Brandywine will assume full property management and leasing responsibilities at the two buildings, currently 88 percent leased to multiple tenants including Delaware Investments, Ernst & Young, Pricewaterhouse Coopers, and Wolters Kluwer Health.
"This transaction enables us to acquire two of Philadelphia's Trophy-class CBD properties at a significant discount to replacement cost," stated Gerard H. Sweeney, President and Chief Executive Officer of Brandywine Realty Trust. "Commerce Square is currently 88% leased providing good current NOI with significant occupancy and rental rate growth opportunities. This transaction is consistent with our stated objective of increasing overall revenue contribution from urban and town center properties. This acquisition is subject to existing secured debt balances and we will continue acceleration of our non-core asset sale program to continue strengthening our balance sheet."
In a separate agreement, the two firms agreed to sell Four Points Centre and an adjacent 19-acre land parcel located in Austin, TX for $51 million. Brandywine will take the two three-story buildings located in the Northwest submarket in a deal that values the buildings at $217 per square foot. The properties total 193,862 square feet of LEED Gold-certified office space that is currently 100 percent leased. The adjacent parcel is valued at $9 million, and is entitled for development of up to 480,000 square feet of office space. This sale is subject to a 45-day due diligence period, customary closing conditions, and again the completion of the merger between Parkway and Thomas.
Brandywine, one of the largest publicly-traded, full-service real estate companies in the country, owns and manages an urban and suburban portfolio of 283 properties totaling 32.9 million square feet as of June 2013.